Correlation Between Torrid Holdings and AKA Brands

Can any of the company-specific risk be diversified away by investing in both Torrid Holdings and AKA Brands at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Torrid Holdings and AKA Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Torrid Holdings and AKA Brands Holding, you can compare the effects of market volatilities on Torrid Holdings and AKA Brands and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Torrid Holdings with a short position of AKA Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Torrid Holdings and AKA Brands.

Diversification Opportunities for Torrid Holdings and AKA Brands

0.06

Correlation Coefficient

Torrid Holdings  AKA Brands

Significant diversification

The 3 months correlation between Torrid and AKA is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Torrid Holdings and AKA Brands Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKA Brands Holding and Torrid Holdings is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Torrid Holdings are associated (or correlated) with AKA Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AKA Brands Holding has no effect on the direction of Torrid Holdings i.e., Torrid Holdings and AKA Brands go up and down completely randomly.

Pair Corralation between Torrid Holdings and AKA Brands

Given the investment horizon of 90 days Torrid Holdings is expected to generate 1.7 times less return on investment than AKA Brands. But when comparing it to its historical volatility, Torrid Holdings is 1.36 times less risky than AKA Brands. It trades about 0.03 of its potential returns per unit of risk. AKA Brands Holding is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,800  in AKA Brands Holding on September 7, 2024 and sell it today you would earn a total of  238.00  from holding AKA Brands Holding or generate 13.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Torrid Holdings  vs.  AKA Brands Holding

Torrid Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Torrid Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

AKA Brands Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AKA Brands Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward-looking signals, AKA Brands is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Torrid Holdings and AKA Brands

The main advantage of trading using opposite Torrid Holdings and AKA Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Torrid Holdings position performs unexpectedly, AKA Brands can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in AKA Brands will offset losses from the drop in AKA Brands' long position.

The idea behind Torrid Holdings and AKA Brands Holding pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.